The escalation of tensions in the Middle East triggered a significant oil supply disruption, impacting Asian markets and exposing vulnerabilities in economies reliant on imported fuel. In South Korea, the KOSPI index surged to a record high of 218,000 won for Samsung Electronics on February 26, but subsequently retraced as foreign investors began pulling funds amid rising uncertainty. Technical analysis highlighted strong resistance near previous highs, with major support levels at 2,500 and 2,400 points being closely watched by traders. Market sentiment shifted from optimism to caution, with analysts warning that prolonged conflict could force further capital outflows and weigh on export-dependent stocks. Defensive sectors and companies less exposed to imported fuel costs were seen as relatively safer, but overall volatility remained high. Technical indicators such as MACD and RSI suggested momentum had slowed and downside risks increased [1].
Japanese companies, particularly smaller manufacturers and logistics firms, faced higher costs and scarce supplies due to the oil shock. Tonami Transportation instructed drivers to conserve fuel, while auto parts and plastics makers reported surging material costs. The uncertainty over potential closures of shipping routes like the Strait of Hormuz exacerbated the situation. Market analysis indicated that the oil supply disruption could persist, with trading sentiment remaining cautious and technical indicators pointing to continued volatility. Companies were forced to pass some increased costs to customers, but options for relief were limited and costly [2].
However, signs of de-escalation in the Middle East conflict led to a sharp drop in oil prices, sparking a rally in Asia-Pacific equities. South Korea's Kospi surged 3.5%, Kosdaq rose 3.29%, Japan's Nikkei 225 climbed 2.2%, and Topix added 2.47%. Australia's S&P/ASX 200 rose by over 0.74%, and Hong Kong Hang Seng index futures were at 25,020, up from the previous close of 24,382.47. The gains followed U.S. President Donald Trump's announcement that he had instructed the U.S. military to delay planned strikes on Iran's power plants and energy facilities for five days after discussions with Iranian officials. Iranian state media disputed Trump's account, denying any talks had taken place. Oil prices tumbled on Monday after Trump's comments, but stabilized in early Tuesday trading, with U.S. West Texas Intermediate about 1.5% higher at $89.5 per barrel. U.S. equity markets also rallied, with the Dow Jones Industrial Average jumping 631 points (1.38%) to close at 46,208.47, the S&P 500 rising 1.15% to 6,581.00, and the Nasdaq Composite gaining 1.38% to 21,946.76. Before Trump's comments, futures pointed to more losses due to skyrocketing oil prices and uncertainty, but after his remarks, Dow futures briefly surged more than 1,000 points [3].
According to [1], the South Korean market remains vulnerable to external shocks, especially oil price fluctuations, and traders are advised to monitor global oil prices and foreign fund flows closely. Meanwhile, [2] reports that Japanese companies are bracing for continued elevated costs and uncertain supply chains, with contingency plans and fuel-saving measures becoming the norm. However, [3] notes that the recent drop in oil prices and signs of de-escalation have temporarily eased investor concerns and sparked a broad rally across Asian markets.
CONCLUSION
The Middle East oil shock initially heightened volatility and exposed vulnerabilities in Asian markets, particularly in South Korea and Japan. However, signs of de-escalation and falling oil prices have sparked a strong rally, temporarily easing investor concerns. Despite the rebound, analysts and market participants remain cautious, closely monitoring geopolitical developments and oil price movements for further risks.